Hello and welcome to the Gulfport Energy Corporation First Quarter 2022 Earnings Conference Call and Webcast. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jessica Antle, Director of Investor Relations. Jessica, please go ahead.

Thank you and good morning. Welcome to Gulfport Energy Corporation's first quarter 2022 earnings conference call. I am Jessica Antle. Speakers on today's call include Tim Cutt, Chief Executive Officer; and Bill Buese, Executive Vice President and Chief Financial Officer. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance and business. We caution you that the actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non-GAAP measures. Reconciliations to the comparable GAAP measures will be posted on our website. An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement, please review at your leisure. At this time, I would like to turn the call over to Tim.

Thanks, Jessica and good morning, and thank you for joining the call. I will begin this morning with a summary of the first quarter highlights followed by an operational update before turning the call to Bill to discuss the financials. As you saw from our release, we had a very strong quarter delivering over 1 billion cubic feet equivalent of gas per day and $117 million of free cash flow. We exited the quarter with a leverage ratio of 0.7 and liquidity of $568 million. We began executing our share buyback program and the board has recently approved an additional $100 million taking the program to $200 million, which represents approximately 50% of expected free cash flow. Turning to production. Our strong first quarter production was driven by the continued outperformance of our 2021 development program, excellent uptime during the winter months and the addition of five new SCOOP wells performing above expectations. Giving the time of our development program, we expect production to decline in the second and third quarters before growing significantly during the fourth quarter. As previously mentioned, we have moved to a continuous drilling program in the Utica, which is expected to support modest year-on-year production growth and a more consistent production profile moving forward. With the encouraging well results in the SCOOP, we will also consider adding additional activity in the second half of the year, next year to help drive operational efficiencies and to retain critical crews and equipment. Overall, we expect to grow production year-on-year by more than 5% and stay above 1 billion cubic feet equivalent per day throughout 2023. Turning to our development program. I'm pleased to report that our results in both the SCOOP and Utica continue to outperform historical wells. We remain focused on delivering peer-leading development costs per…

Thank you, Tim, and good morning, everyone. As Tim suggested in his remarks, we had another solid quarter on both the operational and financial fronts, larger driven by the continued outperformance of our 2021 development program and supported by a strong commodity price environment. I'll now take a few minutes to provide a high level overview of our first quarter financial results and update on our improved liquidity position, spring redetermination process and return of capital initiatives before opening the call up for Q&A. For the three-month period ended March 31, 2022, we reported a net loss of $492 million and generated $235 million of adjusted EBITDA. A $664 million unrealized loss associated with our commodity derivative portfolio driven by the large increase in commodity prices during the quarter was the key driver of the net loss for the period. Net cash provided by operating activities totaled $254 million during the first quarter and we generated free cash flow of $117 million for the same period. We used the majority of our free cash flow to repay borrowings on our credit facility and to fund our ongoing common share repurchase program. On the derivative front, we entered into commodity derivative contracts during the first quarter to opportunistically hedge and lock in future free cash flow generation. As of May 2, we had natural gas swap and collar contracts totaling approximately 621 million cubic feet per day at an average floor price of $2.66 per Mcf for 2022 and natural gas swap and collar contracts totaling approximately 450 million cubic feet per day at an average floor price of $3.19 per Mcf for 2023. We also began layering in derivatives for 2024 and currently have natural gas swap contracts totaling approximately 35 million cubic feet per day at an average floor…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Neal Dingmann from Truist. Your line is now live.

Good morning all. Tim, first question maybe just on asset allocation specifically, you guys continue to run a nice balanced program, just wondering as you continue or if the market continues to see sort of service inflation and just pent-up demand. Would you all considering allocating maybe initially to the Utica then to the Midcon in order to have a little bit more capital efficiency? Or I'm just wondering if you would consider that or will the program continue to be sort of balanced?

I mean, I think the program will continue to be balanced, but I do see, as I said in my remarks, the opportunity to potentially go to a more continuous program in the SCOOP. Right now, we have a – looking in next year, we have drilling going on kind of through mid-year and then dropping that rig. We do see an opportunity with our inventory to carry that on. I think in the current market, I think having a continuous rig in the Utica and in the SCOOP will help us a lot. Dropping rigs, picking those back up, moving multiple frac units in and out can become very problematic. So I think when we talk about kind of organic growth is to keep kind of in that two rig type program.

Okay. And then just lastly, I was interested on your comment on maybe looking at a little bit of acreage. You – definitely, you all seem to have one of the bigger acreage position, especially when you look at both plays. Just your thoughts, is that more just bolting on what you have or why even considered more on addition? Maybe just talk about again either M&A or just maybe further expand on that comment that you had talked about acreage a little bit.

Yes. I think we've been saying the open acreage in the Utica. We see certainly additional acreage in the wet gas window. We see the ability to move that gas out of the basin. It is anything that we would pick up these kind of prices, especially with the liquid prices being strong would be extremely competitive in the portfolio. And so, we're just looking at the most economic outcomes, so that's about as simple as it is Neal.

And then I'll just throw one, a third one just on the shareholder returns, great job on obviously starting on the buybacks, but just thoughts on would you mix in dividends anytime soon and that it will maybe stick to buybacks given how cheap the stock continues to be.

I'll turn out to Bill.

Yes, Neal, I mean, as I said, we continue all – we consider all alternatives, but for the time being and the way our stock is still trading compared to the NAV and just our approved deserves for share. I think we'll still focus on share repurchase for the short-term, but all – everything is still on the table, Neal. We still – we discussed it every board meeting and frequently internally so.

No agree with you, Bill. Thanks. Glad to hear that. Thank you.

Thanks, Neal.

Thank you. Next question today is coming from Zach Parham from JPMorgan. Your line is now live.

Hi, guys. Thanks for taking my question. Maybe if you could just give us a little more color on the casing failure you experienced in the Utica. What do you think were the drivers of the issue and maybe a little more on, if you think this is something you could run into again in the future?

That's good questions, Zach. I mean, the good news is we went back and we studied all of our pumping pressures and everything. Everything else is well within range of what we've been doing for the last number of years. This ERW pipe is a pipe that we've used for a number of years as well. After we had the failure, we did an extensive logging suite on the well board, the pipes in good shape. It's just failure in the seam itself. We don't understand full root cause there. It can be – that can be manufacturing, we haven't determined that yet. So, we just wanted to make sure that add an abundance caution for the wells that we had already installed the same pipe. We didn't repeat and have a similar situation going forward. We are going to use seamless pipe in all the vertical sections of our well to avoid any chance of this reoccurring. So we think we’ve done the right thing as prude and operator. We’ve already run 4.5-inch pipe in size of three Charlotte wells. We’re in the process of drilling those wells out now. Those wells had been completed and we are right at the end of that program, right towards the end of that program when we had the issue. And then on Clark wells, we’d already installed the 5.5-inch pipe that also was the ERW pipe. We’ve decided out of an abundance of caution to go ahead and run those liners inside of that pipe as well. And once we have the frac crew available, we’ll go ahead and frac those wells. But it’s just – basically it’s a timing issue for us. It costs a bit of money. Part of the dollars we’re spending are associated with procuring the seamless pipe. But we think we’ve got a good plan going forward.

Got it. And then maybe shifting over to cash return. You have been relatively aggressive with the buyback thus far and obviously raise the buyback authorization. Can you talk a little bit about the pace of the buyback going forward? And how aggressive you plan to be? At the current pace you’re going, you’ll clearly finish that by within 2022. Is that the plan?

Yes. I mean, as you know, with buybacks, Zach, we’re always going to look at what’s the best thing for the shareholder. Right now, we believe our share price is still significantly undervalued and it’s a fairly easy discussion about carrying that on. And that’s why the Board decided to do the next 100. We’ll look at that again, as we work through the next phase, once we finish out the first 100, moving to the second 100. And we’re going to just look at it, like Bill said, we’ve got all the tools available to us. We could move to a common dividend. We’re always looking at the preferred. And so it would be hard for me to say what kind of pace we’re going to be on for the buybacks, because it really depends on where our share price is at the time.

Got it. Thanks guys. And may I’ll just sneak one more in. The initial SCOOP wells on the Nelda pad are outperforming. Just any thoughts on what the drivers are. I know you talked about running bigger fracs and wider spacing there. But just maybe any additional color you have.

No, I think that’s it. The wells we drilled last year were called our on ASMO [ph] it’s the orientation of the wells. We thought those would be the best wells in the SCOOP. So we completed these wells, thinking maybe we’d have a little bit lower performance on those. We’re actually outperforming the on ASMO wells. It is, I think it really is getting the spacing right and getting the size of the job, right. A little bit on how we flow the wells back, but these are the first wells we’ve seen sustain production. You typically in the SCOOP, you hit peak production and you start declining, whereas in the Utica you sustain production for a period of time. As you see in our chart in the deck, we could see sustained production for three, four months here. So obviously as we bring the SCR and O’Neal wells on, we’ll be looking for hopefully similar performance. We haven’t planned on that type of performance yet, but super pleased with our subsurface team really dialing in and dialing in each of our fracs jobs of what that part of the reservoir in the Utica and the SCOOP is telling us.

Thanks guys. That’s it from me.

All right. Thank you.

Thank you. The next question is coming from Steven Dechert from KeyBanc. Your line is now live.

Hey, guys. I just want to get some more color on why is well completions in the Utica were delayed. Thank you.

Yes. It’s associated with the issue that I answered the question on a little bit earlier on the issue we have on the Charlotte pad. So we – basically, our plan was originally to frac the Charlotte, bring those online, move that same frac unit over to the Clarks. We had to take a bit of a timeout to run the in liners on six wells. We let that frac crew go and we’re in the process of procuring a frac crew bag. So that’s the timing difference, we’ve put that in the updated charts. Hopefully, we’ll have that crew procured soon and we get back to business on that. But that’s the issue and that’s why it doesn’t change anything about our run rate exiting the year. And we’re still feeling really good about, especially with the performance we’re seeing on our 2023 potential performance.

Okay. Thanks. That’s it from me.

Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over to Tim for any further closing comments.

All right. Thank you very much. Thanks for your interest and joining the call. As always, if you have any questions, please reach out to our Investor Relations team and that concludes our call. Thank you.

Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line and have a great day. We thank you for your participation today.